Class- or Mass

Written Analysis and

Communication I

Submitted to:

Submitted by:

Prof. Manaswini Acharya

Roll No.- 12PGDM-090

Section- B
Date of Submission: Nov 5, 2012

From

: Joseph Anton

To

: Mr. Dan Wilson

Date

: 20th March 1994

Subject:

Managing excess inventory issue

This report includes a detailed analysis of the situation at hand and the
different options available. The major criterions used for evaluation are
our corporate brand and long term profitability and sales.
After much analysis my recommendation would be to slash prices in a
phased and methodical manner so as to protect our image as well as
solve the excessive inventory problem.

Executive Summary
Neptune Gourmet Seafood is one of the largest seafood producers in North
America. It is an upmarket brand charging a premium of over 25% over its
competitors. Recently they made huge investment in technology to improve
catching processes which lead to an increased inventory.
They are now faced with the solution of this problem of excess inventory
handling. Launching a new low price brand would cannibalize their premium
brand so they should go in for a price reduction. This could be done in phases
wherein they could employ an extensive marketing of their cost leadership and
increased quality standards.

Word Count: 99

Words 95

Table of Contents

Serial No.

Contents

Page No.

Situation Analysis

Problem Statement

Options

Criteria

Evaluations of options

Recommendations

Action Plan

Page | 1

Situational Analysis
Neptune Gourmet Seafood is North America's third-largest seafood producer. It
has nearly 4% market share. Neptune was an upmarket premium brand.
Neptune had emerged as the supplier of choice to the best restaurants within
250miles of its Fort Lauderdale headquarters as well as to the biggest cruise
lines, which together accounted for a third of the companys sales. Another 33%
came from wholesalers that distributed the companys products to restaurants all
over the United States. In fact, sushi bars from New York to Los Angeles
increasingly bought Neptunes frozen fish instead of buying fresh fish and
freezing it themselves. And, befitting the humble origins of founder John Renser,
approximately 4% of Neptunes sales came from a fish market outside Fort
Lauderdale that the company owned and operated.
Neptune invested heavily to stay ahead of rivals. Stanley Renser, the companys
largest shareholder, had recently expanded the firms equity base, although
doing so had shrunk his share to 10%. The capital infusion allowed Neptune to
invest $9 million in six freezer trawlers of the kind Hargrove had visited. Those
ships autopilot mechanisms guided them to the best fishing grounds,
manipulated fishing gear, landed catches, and reported data to shore. Other
systems, along with new fishing equipment, ensured that only mature fish were
caught and that the nets were not overfilled, thus reducing damage to the haul.
As a result, Neptune increasingly landed only top-quality catches.
This resulted in an increased inventory problem. The major factors to be
considered while addressing this situation is the current brand image of Neptune
and how it would affect/change when it implements the choice of decision it
makes. People who are brand loyal and are connoisseurs of good sea food would
see this as bold step and would understand the reasons of price cuts at the same
quality. Economies of scales could be exploited when undergoing this approach
of price cutting.

Problem Statement
Management of excessive inventory without affecting the brand image and
profitability.

Page | 2

Options
1.
2.
3.
4.

Reduce the prices of the existing premium brand by 40-50%

Sell excess inventory to a wholesaler in some other market at lower price.
Launch a low price brand
Dump excess inventory

Criteria
The two basic criterions used to analyze the options are
Neptunes brand image as a premium segment player
Long term profitability and sales

Evaluation of options
1. The reduction in the prices would lead to two things. The brand image of
Neptune being the premium segment player would be eroded but at the
same time ensuring that the quality is same as before, customer loyalty
would be retained. It would initiate a price war but due to increased
demands and the benefit of being a premium seller, customers would
prefer Neptunes brand rather than going for other brands. Neptune could
benefit from being the first mover in this situation.
2. It looks to be a viable option, by selling excess inventory as one time order
at lower price in different market however it is a short term solution and
the wholesalers would also be wary of a premium player selling its stock at
such high discounts. This could dent Neptunes image and could lead to
problems in the future.
3. Launching a new low price brand would be a challenging preposition as it
would face competition from all corners and it would be difficult to counter
it. Other players could use this as an opportunity to drive away the
premium customers of Neptune at the same time compete in the low price
segment.
4. Dumping the excessive inventory would not be a wise option as all the
cost incurred in improving the catching process and the stocking cost
would be lost. The brand image would not suffer much but the revenue
lost in the disposal would not be accountable.

Page | 3

Recommendations
Neptune should go in for the price cuts considering all the criterions for
evaluation. Neptune has created its upmarket image and should aggressively
pursue cost leadership along with quality which would lead to increased market
share and customer delight.

Action Plan
Neptune should undertake the following steps:
1. They should undertake a marketing strategy to educate its different
customers of their price reduction reasoning and improved quality. This
could be pursued differently for different consumers. A repositioning of the
existing brand could be done through innovative advertising.
2. To take care of profitability bulk offers could be given to major customers
which would not only solve the excessive inventory problem but also
reduced profitability.
3. First movers advantage could be exploited in obtaining the first share of
the market. Once the other players follow in on those lines, the customers
will no longer doubt the quality of seafood supplied by Neptune and realise
the cost cuts are indeed due to better and improved technology. Then
Neptune would benefit from its differentiating factor of being a premium
player transitioning to a low-mid segment player.

Word Count: 945